Is Cell Phone Insurance Worth It?

Nowadays, it’s nearly impossible to leave the house without seeing someone check their email, play a quick game of Angry Birds, or look up reviews for a restaurant on their phone. Thanks to the many innovations in mobile technology over the last five years or so, smartphone usage has become ubiquitous.

However, along with their impressive functionality, smartphones come with a higher price tag. Fortunately, the majority of these costs are absorbed by your carrier. That $200 iPhone or Android you paid for would be closer to $600 if you bought it completely unsubsidized without committing to a two-year contract.

But, unfortunately, there’s a lot that can happen to your phone during your contract period. It could fall into the toilet, slip out of your hand and onto the pavement, or accidentally get left behind somewhere, never to be seen again. Ordinarily, when this happens, you’re on the hook for replacing your phone – which could cost hundreds of dollars. Ouch! So how can you mitigate the cost of replacement if you lose or break your phone?

The obvious answer is to sign up for cell phone insurance when you get your new phone. For approximately $7 a month, depending on your carrier, you get your phone replaced if anything happens to it, whether or not it’s your fault. Seems like a great deal, right? Not exactly.

Why You Shouldn’t Buy Cell Phone Insurance

Anyone who can do basic math might notice that the $7 per month you pay for insurance adds up very quickly. Over the course of your contract, you’d end up paying $168 for a service that you may never use.

“That’s fine,” you say. “I’ll just ‘accidentally’ lose my phone a year in, so that I’ll take advantage of my insurance and get a brand new device.” Better think twice about that too. When you get your phone replaced, you’re required to pay a deductible which can range anywhere between $50 and $200, and you’re not guaranteed to get a newer or better phone in return. In fact, it’s not even guaranteed you’ll get the same phone or even an unused one.

So at this point, you’ve paid for two years of insurance ($168) plus your deductible (probably $100), all for a device that might not be as good as the one you started out with. Now to some people, this may still sound like a good deal. If you’re shelling out $268 instead of $600, you’re up $332 – if that’s how you want to think about it. There are , however, a number of better and more economical alternatives to consider.

Cell Phone Insurance Alternatives

Get a Personal Articles Insurance Policy

Many people don’t realize that they can get their phones insured elsewhere. Instead of paying $84 a year, a regular insurance agency may offer to cover your phone at a price that’s less than half of that. Simply call an agent and ask to take out what’s called a “personal articles policy” on your phone.

One other benefit to going this route is that, more often than not, you won’t even have to pay a deductible. Once you file a claim, you’ll simply receive a check to use toward the purchase of your replacement phone. Another advantage is that you’ll likely choose which phone to replace your old one with or, at the very worst, you’ll get the same model back. But if you take out a policy provided by your carrier, you may end up with a not-quite-as-good refurbished model.

That said, make sure you understand how this type of policy works before you sign. Terms can be slightly different depending on the insurance agency you go with and the premium, so ask your agent a few questions first:

Will there be a deductible?

What kind of losses are covered? If you drop your phone and it shatters, will it be replaced? What about water damage?

How will your phone be replaced: Will you receive a check for the same amount you paid for it? Or something less to account for depreciation?

Don’t Insure Your Phone at All

Even though taking a personal articles policy might be great for peace of mind at a reasonable price, it’s still a sunk cost if you’re generally careful with your possessions, especially ones as expensive as most smartphones are nowadays. In general, I assume most people fall into this category. I personally have never lost a cell phone and can probably count on one hand the number of people I know who have. Still, accidents happen, even among the best of us. What do you do then?

1. Buy a Used Phone
Instead of shelling out your hard-earned money for a brand new phone, think about purchasing one second-hand for considerably less. Let’s say you own Google’s Nexus S phone. Off contract, as of this writing, a new one will set you back $530 from Best Buy, which is the only place you can buy it new. That’s a pretty hefty chunk of change. However, if you’re willing to buy a pre-owned one, it’s not difficult at all to find one under $225 in like-new condition with zero scratches on sites like Craigslist, Swappa.com, and eBay. All it takes is a few minutes of your time to dig up some great deals.

2. Pay Yourself the Monthly Insurance Cost
Another alternative is to pay yourself the monthly insurance cost to create a small cushion in case you do need to replace your phone (i.e. emergency fund). This may not cover the entire expense of replacement, but then you still have the money if you make it through the entire two-year contract with phone in hand.

Final Word

Long story short, just think of cell phone insurance as those evil green pigs that are out to get you in Angry Birds. You’re ultimately better off without it in all likelihood, but if you absolutely must, get your phone insured elsewhere.

Have you ever bought cell phone insurance? If so, have you ever had to use it? What other alternatives are there in case you lose your phone?

This is a guest post by Kenny Kraisornkowit, who offers shopping advice, product reviews, and ways to save money on tech gear and gadgets at Savoo, the U.K.-based version of the popular deal site, Savings.com.

I agree with the write. For the most part the insurance from your carrier is a rip-off. Wells Fargo Bank credit card has a deal where if you pay your cell phone bill through their credit card, they will insure your phone up to $200.00 w/ a $50.00 for free. I got this route and dropped the carrier insurance. I didn’t know you could get personal articles insurance and might check that out.

http://www.frugalliving.com.au/ Crystal @ Frugal Living

I didn’t get cell insurance, my phone got stolen while I was donating blood 2 months later, and I was really happy I bought my phone using my Discover Card since they reimbursed my $350 loss after tons of paperwork…

Megscole64

I have to say though that I have best buys cell phone coverage and had to use it when my cell phone died. I had a blackberry and the retail value was $400. I was not due for an upgrade but was able to apply that $400 amount to any phone I wanted. No deductible.

I never knew you could add a phone to a homeowners policy though and am definitely going to look into that. :)

Benjamin Metzler

It depends on the phone. An iPhone 4S is $399 with a contract and $849 without. If I drop a subsidize phone in water, I’m still locked into my 2 year contract and it will cost me $849 to replace the phone. $99 for AppleCare+ or SquareTrade seems like a bargain. Neither covers loss or theft, but I’m more likely to drop my phone then have it stolen (of course now my phone will get stolen :-).

http://www.myuniversitymoney.com J.B @ My university money

Great post! I was offered the insurance but I got the phone just after I got my tenant pack, and it includes personal belongings.

Anonymous

By paying for your phone bill with your Credit Card, many Credit Card companies will actually provide the Cell Phone Insurance for you. If your phone becomes damaged, simply contact Visa/Mastercard rather than your provider. Most people aren’t aware of this little Credit Card perk.

Don W Mayfield

Personally I just keep my old phone as backup in case I loose my phone.

Toastypostage

Thank you for this article! I just looked into “personal articles” insurance for my phone and went out and got it the same day. For my Samsung Galaxy II S, AT&T was going to charge me $7 a month with a $200 deductible. Through my insurance company, I got my cell phone insured and it cost me $25 a YEAR with NO DEDUCTIBLE. This covers damage, lost/stolen, water damage, and everything else except manufacturer malfunction (which should be covered by the warranty). If anything happens to my phone, I let the insurance company know and they write me a check the same day for what the phone cost new. You saved me ALOT of money!

Allenjohn11

Who is your insurance company? I Checked with farmers, no such thing yet,, let me know, [email protected]

Ricardo Sepulveda

hi, whats your insurance name?

Jessica

HI What’s your insurance company that charged you $25 a year with no deductible? thanks!

T

I bought a HTC EVO 4G about a year after it came out, yes I know stupid of me to buy such an old device, but anyway, I paid sprint my $8 a month insurance premium with a $100 deductible if any damage not manufacturer related occurred and I had to have my phone replaced over 6 times in the course of my 2 year contract and I only shelled out the $100 1 time. Effectively having that insurance saved me about $2,000 because if I had been forced to replace the phone each time it would have been another $400 so I think it is a very wise investment but I’ll definitely be looking into the personal articles protection at my insurance company.

San

This is not correct. There is a deductible each time you make a claim — and you’re limited to 2 claims per year. I’ve been a sprint customer for over 7 years.

lreillyi

The 2 claims a year is only for electrical/manufacturing at no cost… you can have as many claims as needed. (I have had my phone stolen, broken, and then lost within 3 months… all 3 replaced with deductible.)

Lizzzz

Thanks for the article. I should have read it BEFORE I bought insurance for $10.99 deducted from my checking account every month for the last 1 1/2 years. I was told by the Verizon sales rep that my phone if lost or damaged would be replaced for free. I was not told that an outside company called Esecuritel would handle the claim. When I called today to report my damaged phone, they told me I had a deductible and my new phone would cost $175.00. Well, the Apple store can replace my phone today right away for $150.00 plus tax. I cancelled the insurance on the spot. It is bogus. Thanks for reading.

Dr. Greg Baxter

Agree with Lizzzz. After finding that I’ve been paying $7/month for the last 16 months, I decided to replace my ATT device, which although functional, had a cracked screen. I paid $199 deductible, and factoring in the money paid monthly to date, this has cost me somewhere near $320. Well, I reasoned, the old phone could be put to good use. Nope. Now they also want the damaged phone returned. I could have upgraded to a newer model phone, without monthly commitment, for $199. Why did I ever say yes to insurance? Why does anyone?

EWOlson

I bought a phone with Cricket. I also got the insurance. The insurance cost me $5 a month. The phone cost me $250 and I had no contract. Month to month. Less than a year later the phone was stolen. I got the same model phone, new, for half the price I originally paid. $125. Well worth it for me. I still have the insurance and have never had to use it again, but it is nice to know it is there if I need it.

GotJ

These phone insurance deals are mostly a rip-off. Do math and comparison to other insurance scenarios. Say compare to car insurance. Compared to an Asurion covered policy on major carriers ($10-15 a month for a $600 phone + $100-$200 deductible) that would be like paying $333 to 500 A MONTH for a $20,000 car with a $5,000 deductible. Of course, not exactly a fair comparison because with cars you pay long term where a phone is usually two years. Nonetheless, it still put some perspective on how much these phone policies add up. Those companies make a killing off these insurance plans. Just get used phone, get a nice cover case, and be responsible. Your incident rates will be low and you won’t be paying 50+% of your own phone’s value in just two years.

P. Mathews

We had insurance on our kid’s phones and just canceled it. My son broke his, and with insurance it still cost more than $150 to replace. He could have bought an IPhone 4 on Ebay for the less than the cost, and we would be saving $30/month on three phones. Buying a used phone to get you through your contract period is much smarter. I could kick myself for the several years of unnecessary contributions to Asurion.

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